What is Supply Chain Management Strategy?
Supply chain management (SCM), is the process of moving products and services from suppliers into distributors. supply chain strategy is the movement of products and information between supply chain stages in order to maximize profitability.
SCM includes the purchase of raw materials, product design, marketing, operations distribution, finance, customer services, and financing. SCM is a vital part of the lives of customers.
A Supply network, or SCM, is designed to maximize overall value. Supply chain profitability is directly related to value. Profitability is simply the difference between total revenue from the customer’s purchase and overall supply chain costs.
These strategies and designs are part of the supply chain design:
- Deciding on the supply chains structure and the activities that each stage will perform
- Selecting the location and capacity of your facility
- Deciding what products are made and where they should be kept
- Choose the mode of transport and the source where you want the information to be collected
- The decisions made in supply chain design are long-term projects that are difficult to reverse.
It is no secret that supply chains today are more complicated than ever. Market and socioeconomic dynamics underscore the need for organizations to adapt to a demand-driven, outside-in world.
Companies must consider a variety of new factors, including rising nationalism and protectionism. Many are now forced to reconsider their business continuity risks and adopt new sourcing strategies. These six supply chain management strategies are designed to support enterprises in today’s environment.
6 Top Supply Chain Strategies
Here are 6 Types of Supply Chain Strategies
Supply chain strategy no. 1: Use demand-driven planning to optimize your business operations and plan.
As supply chain managers use ever-more-powerful digital tools, demand-prediction capabilities continue growing. The advancements in artificial intelligence and the internet of things (IoT) have allowed supply chain management teams to be more responsive and to automatically adjust their supply chains to meet expected demand.
The role of the cloud is growing in the new supply chain. Companies are increasingly moving their data and apps to cloud storage, which allows them to create unified data models that can be augmented with external data sources. This is enabling a level of planning accuracy and predictive capability that was not possible two years ago.
This trend is being confirmed by more companies who are seeing the benefits of their supply-chain modernization investments. Our research shows that cloud-based delivery has a 20% to 30% increase in revenue and improved delivery performance. They also reduced logistics costs by 5%-25%, and they reduced inventories, which in turn decreased working capital requirements by 25%-60%. Asset utilization increased by between 30-35%
Supply chain strategy no. 2: Create an adaptable and agile supply chain strategy that is integrated with production and rapid planning.
When it comes to supply chain management, agility is still the best. Companies are becoming more adept at aligning manufacturing and planning, allowing for greater operational speed, flexibility, and efficiency.
Some companies may not be able to find a fully integrated solution. According to a 2014 study, 55% of companies have “modestly integrated planning.” Only 9% reported having a “highly integrated supply chain planning environment.” These issues are still a problem for many companies.
The problem might be the amount of data and analytics needed to integrate planning and execution in real-time. This barrier is slowly falling with the advent of cloud-based platforms, which link financial and material-planning tasks to business execution activities like procurement, manufacturing, and inventory management. All this can be done directly from an online interface. Companies can now create a zero-latency process plan-to-produce, which allows them to respond faster to market dynamics and adjust seamlessly.
Supply chain strategy no. 3: Optimize product design for supply, manufacturing, and sustainability to increase profitable innovation.
The days of product development and supply chain strategic planning being managed as two separate functions in companies are over. To remain competitive, it is not enough to “throw product designs over the walls” to supply-chain planners. They are the ones who source and manufacture the products.
Take the mobile phone market as an example. There is fierce competition driving manufacturers to create and launch new models every single year. The only way to achieve this is to combine design teams and supply-chain planners onto a single platform (mostly cloud-based). This new collaboration system, along with smart procurement practices like supplier prequalification can help product developers source the best components based on factors such as parts availability, quality, cost, and more.
Research shows that integrating design and supply chain planning can result in a 10%-20% quicker time to market, 10%-20% more product revenue, and 10%-25% lower scrap and rework costs.
Supply chain strategy no. 4: Integrate sales and operations planning to align your supply chain with your business goals.
In the past few years, business risks have increased significantly for companies. Leaders are now facing increasing market uncertainty, from Brexit to tariff wars. Companies must integrate their tactical and operations planning (S&OP), with their forecasting and strategic budget. This is a way to build a planning capability that can translate macro business priorities and risk into a set of on-the-ground execution tasks that can be continuously updated to reflect changes in market conditions.
The integration of business planning, S&OP, and supply-and-demand planning increases business agility. It creates a closed-loop system that allows for efficient execution, planning, execution, and performance management.
Supply chain strategy no. 5: Integrate sustainability into supply chain operations.
Sustainability in all forms, including those that are social or environmental, is now a top priority for the C-suite. Sustainability and the bottom line do not have to be mutually exclusive. The Statement on a Corporation’s Purpose was released by the Business Roundtable this year. It stated that companies should prioritize sustainability in order to generate profits for shareholders.
Sustainability is now in the spotlight. Many supply-chain practices can have a significant impact on environmental health, from pollution to carbon emissions. There are many strategies that companies can employ to optimize their supply chain for sustainability.
- Long-term goals can be set by supply-chain teams to improve sustainability measures such as carbon footprint, energy use, and recycling.
- New technologies can be used by teams to improve environmental performance, such as optimizing truck routes for fuel consumption and reducing carbon emissions throughout the supply chain.
- To provide end-to-end visibility, real-time insights and enable companies to optimize supply chains and make them sustainable, they can adopt a shared data structure.
Supply chain strategy no. 6: Use emerging technologies to ensure reliable supply.
Unexpected shifts in demand require businesses to have a buffer. However, too much inventory can increase costs. New technology can improve demand accuracy and reduce inventory requirements. It also speeds up reaction times and creates a more agile and reliable supply network.
It’s crucial to make informed decisions regarding where to source materials, produce products, and deliver goods, given today’s volatility in global trade and ongoing tariff wars. This will ensure compliance and minimize costs.
It’s not just a buzzword anymore that AI, machine learning, and IoT are now mainstream terms. They are market-proven technologies that streamline supply chains and drive business agility for companies around the world. These capabilities are now built into cloud solutions so customers can immediately harness their potential. You can start using truly transformative technologies right away without having to invest in complicated projects or hard-to-find skills.